Over the past four years, the government has broadened the use of wiretaps to include insider trading, and to great success (the recent convictions of Raj Rajaratnam and Rajat Gupta serve as examples of the trend).

A pending prosecution in New Jersey, however, offers a potential new defense tactic. Although the case concerns a traditional drug prosecution, the issue – whether the marital privilege trumps wiretap interceptions – would apply with equal force to all types of white collar crimes and perhaps give new meaning to Ol’ Blue Eyes’ verse that “Love and Marriage [is] an institute you can’t disparage.”

The New Jersey Supreme Court recently granted cert in the criminal prosecution of Yolanda Terry and her husband Teron Savoy, the alleged leader of a drug distribution network. The Court will determine whether interception of spousal communications by wiretaps pursuant to the New Jersey Wiretap and Electronic Surveillance Control Act (“the Wiretap Act”), N.J.S.A. 2A:156A-1, destroys the marital communications privilege, N.J.R.E. 509. The Court will also weigh whether the crime-fraud exception applies to the privilege.

At trial, the State offered several intercepted cell phone and text message communications into evidence. The communications showed that Savoy had directed Terry to pick up drug money and recover hidden heroin from a seized car. Savoy and Terry attempted to exclude the evidence on the grounds that the marital communications privilege applied. The trial judge ruled that wiretap officers who had monitored the communications during the wiretap could testify to their content. The court reasoned that N.J.R.E. 509 only prevents spouses from disclosing confidential communications, not third parties. As an issue of first impression, the trial court also found that a crime-fraud exception applied.

Upon conviction, Savoy and Terry appealed. The Superior Court reversed and remanded, holding that marital communications do not lose their privilege upon interception regardless of whether a third party in the form of a police officer overhears the conversation. The Superior Court acknowledged the well-established New Jersey common law exception to the privilege that applies when third parties accidentally overhear or eavesdrop on a communication, but refused to extend this exception to wiretap interceptions. Indeed, the Wiretap Act mandates this holding. It states: “No otherwise privileged wire, electronic or oral communication intercepted in accordance with, or in violation of, the provisions of this act, shall lose its privileged character.” The Court also rejected on other grounds the State’s argument that the privilege would not be violated because the intercepted communication would be testified to by a wiretap officer (rather than husband or wife). The Court observed that the State had improperly conflated the marital communications privilege (N.J.R.E. 509) with the privilege against spousal testimony (N.J.R.E. 501(2)).

Turning to the crime-fraud exception, the Court held that neither the law division nor the appellate division could unilaterally engraft a crime-fraud exception onto the marital communications privilege. While numerous states and federal courts apply a crime-fraud exception, the Court found that adding an exception to a privilege adopted by statute required a legislative change to the rules of evidence.

Now the State has appealed, and the New Jersey Supreme Court is poised to weigh the interplay between the marital communications privilege and the Wiretap Act – an increasingly utilized prosecutorial tool, as demonstrated by the government’s tactics in the recent trials of Raj Rajaratnam and Rajat Gupta on white collar charges. The Saul Ewing White Collar and Government Enforcement Practice will keep you apprised of developments.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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